Assume the management of group accompanies wanted to classify divisions into responsibility centers and design performance measurements for each center. Assume there are three divisions A, B & C. Division A receives products from other divisions and sells those products to the market; all its costs are covered by the head office. Division B Purchase row material, labor, overhead, and pay for other sells and administrative costs to produce and sale its own products to the market. Division C Purchase row material, labor, overhead, and pay for other sales and administrative costs to produce and sells its own products and decide on expansion projects. Besides, division C plans to invest ETB 10,000,00 to produce 10,000 units. The unit product cost is ETB 43.5 and plans a 25% profit.

Required:

1. Advise the management how to classify these divisions into responsibility centers based on controllability principle and suggest performance measurement technique for each center with an appropriate reason